This case highlights some of the complexities involved in supply chain management, including the challenge of respecting both worker representation rights and protecting jobs. In January 2004, the German sporting goods company Adidas-Salomon and Oxfam Australia jointly agreed to invite an independent third party, the Workers Rights Consortium (WRC), to investigate allegations of labour violations at the PT Panarub factory, Tangerang, Indonesia. PT Panarub supplied Adidas-Salomon with athletic footwear. The WRC report found, among other things, that in an infringement of the workers' rights to join a union of their own choice, PT Panarub management “actively and systematically discriminates against one union in the plant, Perbupas, in favour of the other union present, SPN”. Among its recommendations, WRC called for a union membership verification process.
Oxfam Australia and the Clean Clothes Campaign have acknowledged that “Adidas responded positively and worked with factory management and local organisations, including both unions in the factory, to improve conditions and to end discrimination against the Perbupas union.” The company worked with PT Panarub to identify a qualified and independent third party to facilitate the union membership verification process. Adidas-Salomon also encouraged PT Panarub to conduct training for all supervisors and administrative staff on the union rights of its workers and the obligation of management and other employees to respect workers' choices about union membership. The training was conducted with ILO assistance in August 2004. In 2006, Adidas-Salomon revealed that “agreement could not be reached on the principles or mechanisms for conducting a factory wide ballot on union membership”.
Despite efforts to resolve the tensions between the factory and the Perbupas union, matters escalated in October 2005 when PT Panarub dismissed 33 workers and placed the entire leadership of Perbupas on suspension for allegedly organising an illegal strike. Adidas-Salomon says it repeatedly urged the factory to review the dismissals and sought assurances that the affected workers would continue to be paid until a resolution was reached. Adidas-Salomon did not intervene in the dismissal procedure directly, preferring that local dispute resolution mechanisms be exhausted. The company's policy of respecting due legal process in all circumstances drew criticism from some NGOs, who questioned the reliability of the Indonesian Manpower Department.
Although the Manpower Department initially supported 30 of the 33 dismissals, in May 2006 the Indonesian Human Rights Commission (Komnas HAM) found that there was no legal basis for the dismissals and recommended that the workers be reinstated. In June 2006, William Anderson of Adidas-Salomon said that the company had asked the factory to reinstate the workers, but had had its requests refused and was not prepared to issue a formal warning to the factory because “If we do and the company refuses to comply, we would have no choice but to terminate relations with them. We don't want to play high stakes because eleven thousand people could then lose their jobs.” Adidas did, however, write to the management again, requesting reinstatement of the workers, or alternatively the setting up of a satisfactory arbitration process. In a letter of August 2006, Adidas stated that it would cap the growth in its orders from Panarub “until a satisfactory conclusion [was] reached in the case”. In April 2007 PT Panarub and the Perbupas union reached an agreement whereby the dismissed workers received a severance package, but were not reinstated.
Adidas has since said that it is unable to guarantee employment for the dismissed workers, but would ask other suppliers to consider employing those affected and pledged to “monitor this to ensure that their applications are treated in a transparent and non-discriminatory manner”. Oxfam Australia and the Clean Clothes Campaign continue to press the company to find jobs for the affected workers. The NGOs also continue to call for delivery of the union membership verification process.
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Maplecroft in partnership with the United Nations Global Compact
